Lord Mandelson, the business and enterprise secretary, underlined the importance of manufacturing to Britain's economy yesterday, telling the annual CBI conference that the sector accounted for half the UK's exports and added more than £150bn to the economy.

"I sometimes hear the term 'post-industrial economy' used to describe the UK," he said. "I barely understand what it means and I hate the term because it doesn't describe where Britain is or where it is going." He told business leaders that despite intense competition the UK remained the sixth largest manufacturer by output. "What the manufacturing sector in Britain knows very well is that we are becoming not a post-industrial economy but a knowledge economy in which our most valuable assets are our skills and capacity for innovation."

Industry today was "not about mills and smokestacks", he said. "It is about the next industrial revolution and the low-carbon or post-carbon technologies that will define the 21st century. If you really want to change the world, choose a career in engineering."

The credit crunch had turned banks away from risky lending, but Mandelson warned that the government would be keeping a sharp eye on their approach to providing credit to the corporate sector.

"We need to be clear that excessive risk-aversion in lenders will do as much damage as excessive risk-taking to both the long-term health of the economy and the banks' ability to strengthen their balance sheets and act prudently in the long-term interests of their shareholders."

Earlier, the prime minister, Gordon Brown, warned against the dangers of protectionism. "Some might want to take a narrow and insular view of today's global crisis; some would say that the best we can do is to let the recession take its course, and that there is no alternative but to muddle through."

He argued that the world was seeing the transition to a truly global economy with the UK well placed to meet the challenge, provided it invested in the skills, technologies and infrastructure needed.

What it did not need was more trade barriers. "We understand that protectionism does not work, for economies or for workers; that better than simply protecting people in their last job is helping people into their next job.

"And so to all those who try to prove, by pointing to this crisis, that globalisation and global markets do not work, our answer is very clear: the route to prosperity is not protectionism but an open, free-trading, flexible globalisation, which must be inclusive and sustainable."

Brown said a key lesson from previous recessions was the consequences of failure to act at the start of the downturn. "Doing 'too little, too late' would mean more damage, more deterioration, the loss of vital businesses, a weaker economy, lower growth, eventually greater fiscal problems and, in that event, higher interest rates and higher taxes."

However, delegates were presented with a very different view from the Conservative leader, David Cameron. He noted that both the European commission and the International Monetary Fund had forecast that Britain would have a more severe recession than any other leading economy. "Far from being well prepared, we're facing a deeper and longer downturn than any other industrialised nation."

It was time for the UK to construct an economy built to last, Cameron said. In the short term that meant a radical approach to monetary policy but it also meant learning three key lessons from recent events.

"That we can never enter a downturn with such a massive deficit ... that we never become so indebted as a country again ... and that we never become so reliant on just a few sectors for growth, so we need a responsible attitude to economic development, bolstered by a government that provides the infrastructure our businesses need."